We are seeing a revolution in energy. Australia’s energy industry is certainly undergoing significant disruption and transformation as it transitions from a heavy reliance on traditional fossil fuel sources to a new energy environment. It’s critical to plan ahead and we were recently fortunate to sit down with Ramez Naam on his visit to Australia. Ramez is a computer scientist, futurist, angel investor and award winning author with a stellar career that includes working for 13 years at Microsoft on versions of Microsoft Outlook, Explorer and Bing search engine. Ramez is also the founder of Apex Nano Technologies and lecturer at Singularity University on Energy, Environment and Innovation. From challenges to impacts, emerging technologies to trends – Ramez put a spotlight on the latest energy themes to understand, right now. 1.What current challenges are impacting the energy sector? Populations are no longer tolerant of what they perceive as polluting energy. So social permission to burn coal is being removed in large parts of the world. On the other side of things, you have these disruptive technologies coming into play that are really changing the cost structure, where we see the cost of solar, the cost of wind and the cost even of energy storage plummeting and that looks quite disruptive to old generation assets. 2.Where are we headed with cheaper energy? In the US now, UBS put out a report saying that renewables are now deflationary to energy prices. We have, without subsidies, deals at the four and a half cent level for solar and four cent a kilowatt hour level for wind. That compares to spot prices in Australia of maybe nine Australian cents a kilowatt hour right now. Or new build prices for coal plants of maybe seven or eight cents a kilowatt hour. In sunny parts of the world, solar is just the cheapest electricity you can buy. In windy parts of the world, wind is just the cheapest electricity you can buy. And that’s a massive change from where we were just three, four or five years ago. 3. You’ve previously mentioned the Kodak moment. What does that mean for energy? There was a day that we talked about the Kodak moment as a fun thing. The moment that you wanted to capture and now we talk about it as the moment of disruption. And so, we see that traditional generation methods are being disrupted. Certainly we’ve seen it with plans for new coal fired capacity being cancelled all around the world. China last year cancelled I think 151 coal power plants that were planned to be built. Forty of them were already under construction. Eighty billion US dollars not spent. We’re hitting an even more disruptive point. The point where the cost of building new solar or new wind is cheaper than the cost to operate an existing coal plant. Imagine that. You’ve built a coal plant and very soon it will be cheaper to build a new solar plant than it is to keep fuelling and running the old coal plant. And that point is right upon us. In the US, it looks like 2021 or 2022. In India, the cheapest solar projects signed last year are probably cheaper than the operating cost of about a quarter of India’s coal fleet. 4. What can leaders do to plan ahead? The first thing that any executive, regulator or government has to do is just accept reality. Understand that these trends have been ongoing for 20 or 30 years. You can plot the cost of solar or wind or batteries coming down since at least 1980. And number two is realise that you can’t stop the inevitable. If this is a global, industry-wide trend, your firm, or your government, or your regulatory body is not going to be able to stop the trend. You have to embrace the trend and say okay, given that this is going to happen, how do we embrace this in a way that returns a profit for us, that provides a good service for our customers, keeps the grid stable and our country flourishing and so on. 5. Industry 4.0 is evolving rapidly. What exponential technology trends are you seeing? Within energy itself, solar modules and panels per watt have dropped from $100 a watt in 1973 to 30 cents a watt now, so that’s an exponential change. Wind turbines we’ve seen a massive drop but capacity factors have gone from 15, 20 percent to a 40, 50, 60 percent in some cases. That’s actually been driven in part by big data and Internet of Things. We’ve seen the ability of utilities in some parts of the world to integrate more renewables onto the grid, more wind especially, by taking sensor readings off of every individual turbine, every individual solar panel, and using that to predict better what the generation is going to look like in timeframes such as the next 15 minutes. Lithium ion batteries have been heroically expensive, but you see now with the South Australian battery bank being built that they’re just dropping into the zone of being economically viable in a certain, specific situation. They’ve dropped by a factor of five since 2010 in price. And they’re going to drop another factor of three to five in the next 10 to 15 years. So materials science, AI, Internet of Things, sensors, big data, and the learning curve of renewables themselves, are all coming together to disrupt this industry. 6. Where are we headed with electric vehicles? Electric vehicles are the biggest opportunity for utilities and distribution that we’ve seen in a generation. In the US, where the numbers are quite well quantified, if we took every light passenger vehicle, every family car and switched it from gasoline to electricity, Americans would spend up to $400 billion on gas. But they’d spend a $100 billion a year more on electricity. So if we’re looking for opportunities to increase electricity sales, I think that’s one of the biggest. And electric vehicles are also an exponential technology. We went from a $250,000 Tesla Roadster to an $80,000 Model S to a $35,000 Model 3 to a $30,000 new Nissan LEAF. And so we’re headed for electric vehicles that are as cheap as gasoline or cheaper and that have a lower cost of operation. A lower lifetime cost, and lower per kilometre cost. So these are going to take off and the utilities that manage to find a way to leverage them or be the providers that sell them, have a big opportunity there. 7. What are the advantages for Australia? Well Australia can be an energy superpower. You have one of the sunniest continents on earth, if not the sunniest. And you have in the southeast some of the class seven winds, the best winds offshore in the world. So that should enable Australia to actually have one of the lowest energy prices around the world. That’s not the case today. Australian wholesale energy prices are quite high and retail energy prices are quite high. But if you can get to that low cost energy, that gives you a competitive advantage in manufacturing, in running data centres, in providing services domestically, and for export. So that’s what I see as an opportunity for the nation. 8. What skills and capabilities are required for this new energy world? There’s an opportunity here for high skilled labour, even when you look at technicians or installers for those solar panels and wind farms. There’s an opportunity to leverage people whose industry is being disrupted – so for example, coal demand globally peaked in 2013 and it’s not going back. Those jobs are going to be under pressure and maybe there’s an opportunity to upskill them for a job that has better working conditions and higher pay. And in addition to that, I think there’s a vital role for people that are skilled with software and data. We’re moving away from a day that we had base load and now we have a whole variety of variable assets that are using big data to help balance load against each other. And that’s a different skill set, and that’s also a skill set and technology Australia could export. You can learn more about Ramez on the SingularityU website.